Dear Visionaries:<div><br></div><div>This is one of two columns about the financial crisis in Europe. Those who take the Daily News may have seen the 650-word version on Wednesday. </div><div><br></div><div>The second column explains why "socialism" is not the cause. The short answer is that Nordic welfare states have the highest taxes, but they have some of the lowest national debt. They go by the common sense rule that governments must balance expenses with revenue. When will the GOP ever learn?</div>
<div><br></div><div>Happy New Year,</div><div><br></div><div>Nick</div><div><br></div><div><p class="MsoNormal" align="center" style="text-align:center"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">EASY
CREDIT AND FISCAL FRAUD CAUSED EURO CRISIS</span></b></p>
<p class="MsoNormal" align="center" style="text-align:center"><font face="Georgia, serif" size="3"><span style="line-height:19px"><br></span></font></p>
<p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">For every irresponsible borrower there is a<br clear="all">
reckless lender (often a German bank)<br clear="all">
~<i>The Economist</i> (December 3, 2011)</span></p><p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""><br></span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">Beginning as the European Economic Community of six nations
in 1958, the European Union (EU) now has 27 members consisting of 502 million
people. The Treaty of Rome committed the countries to an “ever closer union,”
which echoes the “more perfect union” in the U. S. Constitution. The EU motto
is “Unity in Diversity,” very similar to <i>e
pluribus unum</i>, out of many states comes one United States of America.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">Twelve years ago 17 EU countries adopted a common currency
called the euro. When Greece applied for membership in the euro zone in 2001,
it assured the other nations that it had sufficient fiscal discipline to meet
the budget deficit target of 3 percent and total national debt of 60 percent of
GDP. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">It is now clear that both Greek conservative and socialist governments
consistently falsified their economic records. For the week of December 3,
2011, the budget deficit was 9.6 percent, the unemployment rate was 18.4
percent, and 2012 estimate for national debt is whopping 183 percent of GDP.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">Consultants from Goldman Sachs were quite eager to advise
the Greeks how to disguise their mounting debt. As the German magazine <i>Der Spiegel</i> reports: “Goldman Sachs helped the Greek
government mask the true extent of its deficit with the help of a derivatives
deal that legally circumvented the EU Maastricht Treaty deficit rules” <span style="background-image:initial;background-color:white;background-repeat:initial initial">(2/8/10).</span></span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">EU
scholars have speculated that euro zone states knew that the Greeks’ data were
shaky but they chose to admit them anyway.
There are at least two reasons why this happened. First, Italy joined the euro with equally
suspicious books.</span><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif;background-image:initial;background-color:white;background-repeat:initial initial"> After allowing Italy in at the beginning, leaders
of the original twelve found it difficult to deny entry to Greece.</span><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"></span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">Second,
and more significant, a larger euro zone was a great advantage to strong
exporting euro economies such as Germany, Austria, the Netherlands, Finland,
and Belgium. About 40 percent of Germany
huge export market is in the euro zone. One of greatest dangers of investing in
other countries is the possibility of currency devaluation in the recipient
nation, and a common currency would prevent that. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">European
and American banks were more than willing to give overgenerous terms to
businesses and governments in Greece, Ireland, Italy, Portugal, and Spain. America’s
six largest banks have $50 billion at risk in these countries. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">Under
a conservative government Ireland’s Anglo-Irish bank went from making loans of $3
billion in 1987 to $91 billion in 2007.
As a proportion of population this would be the equivalent of an
American bank loaning out $3.4 trillion.
About 300,000 homes in a nation of 4.4 million now stand idle because of
an irrationally exuberant real estate boom/bust.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">Easy
credit all over the world has allowed people and governments to go on the
greatest borrowing spree in human history.
World debt, private and public, has increased from $84 trillion in 2002
to $195 trillion today. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">Many
Germans complain that they are sick of bailing out lazy Greeks, but the Greeks
work more hours a week than the Germans do.
(How do hard-working Irish and Icelanders fit into this North/South
bias?) Rich Greeks, just as their American counterparts, are doing well and are
notorious for not paying taxes, but it will be poor and the disappearing middle
class that will suffer most from their corrupt politicians and bankers. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">Critics
have said that the U.S. historically was more comfortable with military
dictators in Spain, Portugal, and Greece, because they were able to keep
leftist parties at bay. With dictators
only 40 years fresh in their memories, Spaniards, Portuguese, and Greeks are
still struggling to build successful democratic systems without outside
interference.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">At
the most recent European summit leaders agreed to put more money in a general
rescue fund, but only if all 27 nations agree to tough enforcement of budget
deficit rules. Many experts believe that
the new infusion of funds is insufficient to bail-out countries such as Italy
and Spain, Europe’s third and fourth largest economies with trillions of
dollars of debt. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">One
solution is to allow the European Central Bank to act like the U. S. Federal
Reserve Bank, which issues treasury bills for the entire nation and is able to
transfer funds from economically strong areas of the country to weaker regions. </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif"><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12pt;line-height:115%;font-family:Georgia,serif">The
free-market journal <i>The Economist</i>
recommends that “i</span><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">f Europeans wish to avoid the nuclear option of
complete disintegration, they will have to make the leap toward fiscal union”—a
true United States of Europe. We should all wish Europeans well as they attempt
to find a more perfect union.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""><br></span></p><p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif"">Nick Gier taught philosophy at the University of Idaho for
31 years. Read his other columns on Europe at
<a href="http://www.home.roadrunner.com/~nickgier/ThirdWay.htm">www.home.roadrunner.com/~nickgier/ThirdWay.htm</a>.</span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""> </span></p>
<p class="MsoNormal" style="text-indent:.5in"><span style="font-size:12.0pt;line-height:115%;font-family:"Georgia","serif""> </span></p></div>